The Journey to 7 Platforms

Columbia River has 7 portfolio companies, of which 4 were carve-outs. Its focus on the picks & shovels of technology, including fiber optics and IT services, creates synergies across companies, where every portfolio company collaborates in some form or fashion with at least one other portfolio company. The latter is unusual in PE, but creates a nice narrative about cross-pollination synergies when meeting prospective sellers.

For first-time sponsors, Nathan estimates it takes 2 years to find the first deal, and that one should be prepared to spend $300-500k of personal capital before fee income starts to flow. To scale faster, Columbia River Partners hired offshore labor from India. Nathan recalls 3.5 years of 9pm standing calls to ensure their India team members were not a separate back office, but fully integrated and aligned with the business. That level of commitment proved essential to building a team and getting results.

Curiously, Nathan challenges the myth of being founder friendly. He jokingly says "we are not founder -friendly." In his experience, only 1 of 4 founders can succeed as CEO once institutional capital is involved. Too often the transition from owner to leader of a stakeholder-driven company proves too difficult, especially when aggressive growth is the goal. So instead of promising the world to founders, he asks the hard questions upfront and prepares for new leadership when needed, thereby also protecting and growing the founder's rollover equity and setting the stage for growth from, say, $20m of revenue to $100m. Nathan describes this as more honest and ultimately more supportive than promising continuity that rarely works out.

Nathan is a huge proponent of the deal-by-deal model. He acknowledges the tedious deal-by-deal nature of fundraising, as well as the risk of carrying broken deal fees. He even points to a painful experience where the lead capital partner cut them out in the 11th hour. He says the model also offers attractive upside. Columbia River targets 3-5x cash-on-cash returns, compared to the 2-3x more common in traditional private equity funds. Investors gain direct visibility into assets rather than committing blindly for 10 years. And for the sponsor the assets aren't cross-collateralized.